I bought a foreclosure with a sizable lien - help! 😬

[Amanda Grzywaczewski]

Hi all, I'm basically here looking for...a group hug... 😩😂 I can be a little long winded but I'll try my best to get straight to the point. Apologies in advance. Here we go.

Background - purchased second property in December, a foreclosure in Pittsburgh. Great neighborhood, great property, excellent price. Purchased cash, bank was to provide title insurance policy so long as I used their title company - I did. 

Applied for rehab loan before I even closed on house. Have been held up for several weeks as the lender has been waiting on the tax cert. Got news today they received it and we're clear to close with a small caveat. Evidently there was a dispute over if school tax was paid for 2024. Tax service that handles delinquent taxes says yes, city says no. Supervisors on the case. Not a lot of money, not that worried but there's snow inside the house and I'd really prefer to get this show on the road. 

An hour before quitting time on a holiday weekend, I get another email from the lender's title company. This email is asking for my title insurance policy because there is a 20k lien on the property. This is the first time I'm hearing of this. No other info in email. I immediately contact the bank's title company and ask for the insurance policy. She emails me back with a sample policy - not my actual policy 😩

So my question is...is this something frequently seen and easily recifyable or am I looking at a long drawn out process and what's the likelihood insurance will cover this? The policy is on the HUD and it was in the contract that the seller would purchase the policy but I don't have said policy so I'm sort of freaking out. This is a huge rehab. There is enough room in the deal where 20k won't kill it but it would certainly be a swift kick in the you know what.

I hope someone can put my mind at ease, but don't hold back. Give me the good, the bad and the ugly. I'm bracing for it! 

Thanks all!! 

Edit: The intention is buy and hold. 

[Jay Hinrichs]

Quote from @William Whitley:

Well, as long as you have an owner's title insurance policy, you should be okay, subject to the terms of the policy. The title company that issued the policy should be able to get you that policy. If the title insurance company issued the policy, and did not include this lean as an exception (and they likely didn't, because they typically will not close if there is a known lien), then it is incumbent on them to resolve the cloud on the title on your behalf. You just need to know who the title insurance issuer is and be in contact with them. Better would be if you have an attorney that can do so on your behalf. 

Hopefully, that helps.

All the best!

Bill 

In addition did you get a copy of the title commitment/perlim title report prior to closing and read it and understand it ??? thats the first question.. most likly they missed it and as William states title will have to clear it. But it could have been an exception and since you paid cash its incumbent on you to review and approve the title commitment/prelim title report prior to closing.. 

I just bought a bank owned in the fall and same deal if you use our title company we will pay for the title insurance and I think in my case all the escrow fees as well.  Being an Oregon property and being able to review the title commitment/prelim title report I was OK with it but many times I decline that offer and will go with my trusted Title company or closer depending on what state I am buying in we buy in about 20 states so it really depends on location  PA is a tough one with all the liens and such that attach to props compared to say West coast markets that have nary the amount of potential city and county liens.  IE school tax are in your ad valorum tax bill never separate that type of thing.  So as you trying to do get a hold of the actual title policy it should have been mailed to you or e mailed post closing. Read it and make sure there was not an exception for that lien and if not your covered.